Full Speed Ahead?

It Could Happen To You

Consultants such as Echols say there's another often overlooked fact that should make business owners think at least twice before trying to take advantage of another company's crisis: The very act that causes your competition's problem can give you a headache as well. The 1982 Tylenol tampering scare is the perfect reminder that your company is as vulnerable as your competitors'. In that case, seven people in the Chicago area died from consuming cyanide-laced capsules, as did a Peekskill, New York, woman four years later. Tylenol manufacturer Johnson & Johnson recalled 31 million bottles and watched its share of the analgesic market plunge from 35 percent to 7 percent, but it could have happened to any company's pills.

Echols says it's a good idea to think defensively when that kind of news hits a company in your industry. He cites another famous case as an example every entrepreneur should be aware of. In 1993, PepsiCo Inc. was the victim of a cruel hoax during which people from some two dozen states claimed to have found syringes inside cans of Pepsi products. "I guarantee you every executive at Coca-Cola was watching that very closely and pulling their crisis-management manuals off the shelves," Echols says.

Another boomerang that can smack entrepreneurs in the head is "guilt by association." "That runs rampant in a crisis situation," Echols says. "If you're the owner of a pet store, for example, and you've been accused of mistreating your puppies, other pet stores in your area are going to be looked at with the same degree of skepticism by the media and people who buy pets."

Conversely, if your company is a "good guy" and one or two of your competitors are making the industry look bad, Echols says you need to adopt a team mentality. That's exactly what Atlanta apartment owners did in 1995 when one owner issued a letter saying that he wasn't going to renew the leases of many of his tenants and that there was going to be a two- or three-week vacancy period before renewal. Why? The 1996 Summer Olympics were coming to town, and like so many business owners in other Olympic cities, he had the unrealistic expectation that he'd be able to make a mint in less than a month.

Unfortunately for other apartment owners, the story was picked up by the local media, plus many national and international outlets. The news of one business's tactics not only put apartment dwellers in a panic but also made housing owners look very bad.

A local apartment provider led a charge by the Atlanta Apartment Association (AAA) to make all property companies behave responsibly. The Worthing Companies' John Flattery, whose real estate company does annual sales of $50 million, says companies large and small stepped forward to put everyone at ease.

"We enjoy a reputation second only to used-car dealers," Flattery says. "We're the big, fat, ugly landlords, and that one incident exacerbated our [image] problems."

Flattery and the AAA drafted a policy stating that the housing providers it represented wouldn't terminate anyone's lease and that they would rent only vacant sites to Olympic guests. Some 90 percent of the metro area's property owners signed on to express their support for the notion of "all for one and one for all."

"You have to have a `Three Musketeers' philosophy sometimes," Flattery says. "It can be the best thing for your business."

In the end, the reckless landlord rescinded his plan, and the crisis was forgotten. Entrepreneurs, however, learned a valuable lesson. Says Echols, "Although a company should look closely at a competitor's crisis for an opportunity, it must be aware of its own vulnerability."

If you don't hear a boomerang whipping through the air, then examine your business structure to decide whether you want to try to take advantage of that news you heard on your drive to work. And while all aggressive business owners may be tempted to start humming "Go, Speed Racer, go," the smartest move may be to keep your foot off the gas.

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This article was originally published in the April 1999 print edition of Entrepreneur with the headline: Full Speed Ahead?.

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